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Business Combination and Goodwill (Tables) | 12 Months Ended
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Dec. 31, 2019
Business Combinations [Abstract] |
Schedule of Total Purchase Consideration | Total purchase consideration consisted of the following:
Equity consideration (1) | $ | 61,092,050 |
Fair value of ApolloMed preferred stock held by NMM (2) | 19,118,000 |
Fair value of NMM’s noncontrolling interest in APAACO (3) | 5,129,000 |
Fair value of the outstanding ApolloMed stock options (4) | 1,055,333 |
Total purchase consideration | $ | 86,394,383 |
(1) | Equity consideration
Immediately following the Effective Time, pre-merger ApolloMed stockholders continued to hold an aggregate of 6,109,205 shares of ApolloMed common stock. The equity consideration, which represents a portion of the consideration deemed transferred to the pre-Merger ApolloMed stockholders in the Merger, is calculated based on the number of shares of the combined company that the pre-Merger ApolloMed stockholders would own as of the closing of the Merger.
Number of shares of the combined company that would be owned by pre-Merger ApolloMed stockholders (*) | 6,109,205 |
Multiplied by the price per share of ApolloMed’s common stock (**) | $ | 10.00 |
Equity Consideration | $ | 61,092,050 |
(*) | Represents the number of shares of the combined company that pre-Merger ApolloMed stockholders would own at closing of the Merger.
(**) | Represents the closing price of ApolloMed’s common stock on December 8, 2017.
(2) | Fair value of ApolloMed’s preferred shares held by NMM
NMM currently owns all the shares of ApolloMed Series A preferred stock and Series B preferred stock, which were acquired prior to the Merger. As part of the Merger, the ApolloMed Series A preferred stock and Series B preferred stock are remeasured at fair value and included as part of the consideration transferred to ApolloMed. The fair value of the Series A preferred stock and Series B preferred stock is reflective of the liquidation preferences, claims of priority and conversion option values thereof. In aggregate, the Series A preferred stock and Series B preferred stock were valued to be $19.1 million. The valuation methodology was based on an Option Pricing Method ("OPM") which utilized the observable publicly traded common stock price in valuing the Series A preferred stock and the Series B preferred stock within the context of the capital structure of the Company. OPM assumptions included an expected term of 2 years, volatility rate of 37.9%, and a risk-free rate of 1.8%. The fair value of the liquidation preference for the Series A preferred stock and the Series B preferred stock was determined to be $12.7 million and the fair value of the conversion option was determined to be $6.4 million or an aggregate total fair value of $19.1 million.
(3) | Fair value of NMM’s 50% share of APA ACO Inc.
Prior to the Merger, APAACO was owned 50% by ApolloMed and 50% NMM. NMM’s noncontrolling interest in APAACO has been remeasured at fair value as of the closing date and is added to the consideration transferred to ApolloMed as a result of NMM relinquishing its equity investment in APAACO in order to obtain control of ApolloMed. The fair value of NMM’s noncontrolling interest in APAACO has been estimated to be $5.1 million using the discounted cash flow method and NMM recorded a gain on investment for the same amount to reflect the fair value of this investment prior the Merger.
(4) | Fair value of the ApolloMed outstanding stock options
The fair value of the outstanding ApolloMed stock options is included in consideration transferred in accordance with ASC 805. The outstanding ApolloMed stock options are expected to vest in conjunction with the Merger due to a pre-existing change-of-control provision associated with the awards. There is no future service requirement.
Summary of Estimated Fair Values of Assets Acquired and Liabilities Assumed | The following table sets forth the final allocation of the purchase consideration to the identifiable tangible and intangible assets acquired and liabilities assumed of ApolloMed and MMG (see “MMG Transaction” below), with the excess recorded as goodwill:
| Balance Sheet
Assets acquired |
Cash and cash equivalents | $ | 36,367,555 |
Accounts receivable, net | 7,261,588 |
Other receivables | 3,211,028 |
Prepaid expenses | 249,193 |
Property, plant and equipment, net | 1,114,332 |
Restricted cash | 745,220 |
Fair value of intangible assets acquired | 14,984,000 |
Deferred tax assets | 2,498,417 |
Other assets | 217,241 |
Goodwill | 86,197,395 |
Accounts payable and accrued liabilities | (8,632,893 | )
Medical liabilities | (39,353,540 | )
Line of credit | (25,000 | )
Convertible note payable, net | (5,376,215 | )
Convertible note payable - related party | (9,921,938 | )
Noncontrolling interest | (3,142,000 | )
Net assets acquired | $ | 86,394,383 |
Total purchase consideration | $ | 86,394,383 |
The following table summarizes the preliminary estimated fair values of the assets acquired and liabilities assumed, as of the acquisition date:
| Preliminary Balance Sheet
Assets acquired |
Cash and cash equivalents | $ | 581,965 |
Accounts receivable, net | 5,150,060 |
Other current assets | 198,056 |
Network relationship intangible assets | 11,411,000 |
Goodwill | 23,018,675 |
Accounts payable | (3,211,349 | )
Medical liabilities | (12,154,726 | )
Subordinated loan | (15,327,013 | )
Net assets acquired | $ | 9,666,668 |
Equity investment contributed | $ | 2,416,668 |
Cash paid | $ | 7,250,000 |
The following table summarizes the preliminary estimated fair values of the assets acquired and liabilities assumed, as of the acquisition date:
| Preliminary Balance Sheet
Assets acquired |
Cash and cash equivalents | $ | 3,568,554 |
Accounts receivable, net | 10,335,664 |
Other current assets | 4,360,850 |
Network relationship intangible assets | 22,636,000 |
Goodwill | 28,585,209 |
Accounts payable | (2,776,631 | )
Deferred tax liabilities | (6,334,368 | )
Medical liabilities | (15,319,714 | )
Net assets acquired | $ | 45,055,564 |
Cash paid | $ | 45,055,564 |
Summary of Pro Forma Information | The supplemental information on an unaudited pro forma financial basis presents the combined results of ApolloMed and its 2019 acquisitions as if each acquisition had occurred on January 1, 2018:
|  | Year Ended December 31, 2019 (unaudited) |  | Year Ended December 31, 2018 (unaudited)
Revenue |  | $ | 658,010,954 |  |  | $ | 726,074,752 |
Net income |  | $ | 10,867,496 |  |  | $ | 58,879,491 |
Net income attributable to Apollo Medical Holdings, Inc. |  | $ | 7,310,724 |  |  | $ | 9,447,002 |
EPS - Basic |  | $ | 0.21 |  |  | $ | 0.29 |
EPS - Diluted |  | $ | 0.20 |  |  | $ | 0.25 |
The pro forma combined historical results, as if ApolloMed had been acquired as of January 1, 2017, are estimated as follows (unaudited):
| Year Ended December 31, 2017
Net revenues | $ | 478,873,780 |
Net income attributable to Apollo Medical Holdings, Inc. | $ | 9,982,706 |
Weighted average common shares outstanding: |
Basic | 25,525,786 |
Earnings per share: |
Basic | $ | 0.39 |
Weighted average common shares outstanding: |
Diluted | 28,661,735 |
Earnings per share: |
Diluted | $ | 0.35 |
Schedule of Carrying Value of Goodwill | The following is a summary of goodwill activity for the years ended December 31, 2019 and 2018:
| Amount
Balance at January 1, 2018 | $ | 189,847,202 |
Adjustments | (242,456 | )
Impairment - (MMG) | (3,798,866 | )
Balance at December 31, 2018 | $ | 185,805,880 |
Acquisitions | 52,699,324 |
Balance at December 31, 2019 | $ | 238,505,204 |

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